INTERNATIONAL SLAVJANIC UNIVERSITY

GAVRILO ROMANOVIC DERZAVIN

BITOLA – REPUBLIC NORTH MACEDONIA

Direction - law studies

Paperwork on the subject: English language

Topic: CASE STUDY: ZARA - ANALYSIS

Mentor: Made by:

Doc.D-r Katerina Vidova Toso Veleski
Index number: 2082012
Year 2021
Contents
Abstract......................................................................................................................................3
1. Introduction.........................................................................................................................4
2. The beginning of everything...............................................................................................5
3. Zara: Fast Fashion Pioneer.................................................................................................6
4. The Secret of Zara’s success: Their Supply Chain.............................................................7
5. Business Model Analysis....................................................................................................7
5.1. Identification of key success factors of Zara...............................................................7
6. Discussion of key success factors of Zara..........................................................................8
6.1. Individuation................................................................................................................8
6.2. Limited........................................................................................................................8
6.3. Designer.......................................................................................................................8
6.4. Data..............................................................................................................................9
6.5. Manufacture and Logistic............................................................................................9
7. Compare and contrast Zara’s product management process with traditional new product
process........................................................................................................................................9
7.1. Opportunity identification and selection.....................................................................9
7.2. Concept generation......................................................................................................9
7.3. Development..............................................................................................................10
7.4. Launch.......................................................................................................................10
7.5. Evaluate Zara’s product management process and ‘New product process’..............11
8. Conclusion.....................................................................................................................12
9. Used litertaure...................................................................................................................13

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Abstract
The Fashion Industry has been changing among the years, and fashion companies are
changing the way they do business. They are focusing each day more on the consumers, and
what they are looking for at that moment. Fast Fashion concept is gaining ground in the
industry because now it is more important to always follow the latest trends and produce
according to that, than to have just two collections per year for a higher price. Now,
consumers are always looking for different products and those companies who can give them
that will achieve the success more easily. Consumers not only are looking for different
products, but even more, are using different channels to shop. The online shopping is winning
users day by day because now people search for convenience and comfort. However, this
behaviour can be different from the different generations, and it is important to know exactly
which target it is important to reach and satisfy their desires. This way, fashion companies
need to adapt their business and turn it more technological, to make the shopping experience
the more enjoyable as possible.
Zara is one of the most popular fast fashion brands which expand quickly in the
worldwide fashion market. This report aims to develop and analysis the case of Zara to
explore Zara’s successful legend in the fashion world. To begin with, the report is going to
analysis the business model of Zara to find the successful factors. In addition, it will compare,
contrast and evaluate Zara's previous and new product management process. Last but not
least, the report will discuss the market application of Zara's successful product management
process with brands HM, GAP, and UNIQLO.

Keywords: Fast Fashion, Marketing, Strategy, Generations of Consumer, Zara, management

process

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 1. Introduction
Zara is the flagship chain store of Inditex Group owned by Spanish tycoon Amancio
Ortega, who also owns brands such as Massimo Dutti, Pull and Bear, Oysho, Uterqüe,
Stradivarius and Bershka. Amancio Ortega Gaona is a famous Galician fashion designer and
entrepreneur, ranked by Forbes as Spain's richest man and the 10th richest man in the World
in 2009. Amancio Ortega was born on March 28, 1936 in Leon, Spain. At the age of 13,
Ortega began working for a shirtmaker as a delivery boy in La Coruña, Galicia, the centre of
the Iberian textile industry. He worked for a variety of stores and tailors and studied how
products and costs changed as they travelled from the manufacturer to the consumer. As a
result, he became focused on the importance of getting products directly to the consumer
without a middle man. Ortega never attended higher education and continued to work in the
textile field into the early 1960s. After becoming manager of a local clothing shop, he
discovered that only wealthy individuals could afford to purchase fine clothing and became
even more determined to make quality clothes accessible to everyone. As a result, Ortega
started making his own products, purchasing cheaper fabric from Barcelona and selling good
quality, cheaper products to local stores. In 1963, at the age of 27, Amancio Ortega founded
his own company called Confecciones Goa that made and sold fine bathrobes.

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 2. The beginning of everything
Inditex, founded by Amancio Ortega and his ex-wife Rosalia Mera, in 1963 went into
business as a dressmaker. Just in 1985 was incorporated as the Group’s holding company.
The Group established a distribution system capable of reacting to the changes in the
market trends quickly, and the focus was always in listening to their customers closely and to
offers them the fashions they desire. As the focus was always the customer, the group created
an organisational structure that covers all stages of the fashion value chain (design,
manufacturing, distribution and sale). (Inditex, 2015).
Nowadays is one of the largest fashion retailers in the world, and has nine brands with
different concepts: Zara (1975), Pull and Bear and Massimo Dutti (1991), Bershka (1998),
Stradivarius (1999), Oysho (2001), Zara Home (2003), Uterqüe (2008) and more recently
Lefties.
Based on the market research made in the context of this thesis, it was possible to
verify that 62% of the 595 respondents know Inditex group, while 38% still do not know
about the group.
Inditex expanded extremely quickly, so in 2001 their stock market shares began
trading. In the beginning, the price of each share was 3,60€, nowadays after a huge increase,
the value reached 32€ per share. It was a tough time for the owner of the group because he
never wanted to lose his focus: the stores and the customer needs. In 2015 the Group had over
7000 stores in 91 markets, has already reached 29 online markets and at the end of the same
year, the company was evaluated in more than $100 billion, what makes it the most valuable
company in Spain. (Fashionista, 2015).

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 3. Zara: Fast Fashion Pioneer
Zara, established in 1975, is the largest brand of Inditex and the sales represent almost
two-thirds of the group’s total sales (Attachment 2). After Zara’s success, it served as an
example for the other brands of the group.
Zara was not always called Zara. In the begging, the owner of Inditex named the store
Zorba, after the classic film Zorba the Greek. However, after realising that there’s a bar near
the store with the same name, he changed it for Zara – the first brand offering fashionable
clothing for lower prices.
The main brand of Inditex had a fast expansion opening stores in Oporto (Portugal,
1988), New York (1989), Paris (France, 1990), Mexico (1992), Greece (1993), Belgium and
Sweden (1994), Malta (1995), Cyprus (1996), Norway and Israel (1997), Germany, Holland
and Brazil (1999) and in 2004 the Group inaugurates the store number 2000 in Hong Kong,
bringing its footprint to 56 countries across Europe, America, Asia and Africa.
Zara is known as the Fast Fashion pioneer. That means that they search for new and
innovative trends in the streets around the world. After that, they take the new ideas to the
designers so that they can produce them in just a few weeks.
Like Amancio Ortega use to say: “Our inspiration comes not only on the catwalks.
My advice to those who want to make the difference is to take a look at the streets. It is on the
street that we can find the biggest catwalk. The fashion is on the streets.”
The process of identifying trends, produce them and put that new products available
for sale, Zara can do this in just two-three weeks. While the other brands and retailer take at
least two months. It is estimated that Zara launches 12000 products per year.
Amancio Ortega revolutionised the fashion world as we know it. Nowadays people
use to say that fashion history has two separate times: before and after Ortega.
“Zara broke with the classic of having two seasons a year that was established for
almost 100 years. Now, pretty much of half of the high-end fashion companies (Louis
Vuitton, Prada) make four to six collections instead of two each year. That is absolutely
because of Zara.” Masoud Golsorkhi, director of the British magazine Tank.
When was ask to the 659 respondents if they know the brand Zara, 100% answered
yes. Those, 90,3% are Zara’s costumer and only 9,7% are not. Only the ones who are, are
going to be studied. The 595 respondents, on average, evaluated Zara as being good in the
following characteristics: products quality, a variety of products, products according to new

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trends, clothes for all occasions, clothes for different styles, price/quality relation, store
design, store environment, employees’ assistance and store location.
4. The Secret of Zara’s success: Their Supply Chain
Zara’s Supply Chain made it possible for the brand to become the Fast Fashion
Pioneer because of their ability to follow new trends and to respond to changes in the
demand.
“The original business idea was very simple. Link customer demand to
manufacturing, and link manufacturing to distribution. That is the idea we still live by.” José
Maria Castellano Ríos, Inditex CEO.
Inditex group committed to the vertical integration model in its operations. When a
supply chain of a company is vertically integrated, it means that some stages of production
are integrated within the company. They produce a substantial proportion of their products in
their own factories, production stages that are more capital-intensive and value-added-
intensive (purchase raw materials, design, cut, dye, quality control, iron, packaging, labelling,

distribution and logistics); and they outsource the production stages that are more labor-
intensive and less value-added-intensive (sewing). (Crofton and Dopico, 2007).

Figure 1 - Zara's Supply Chain

When a new trend is identified, it only takes two/three weeks to design, produce and
distribute the new products to the stores. Most retailers usually replenish their stores on a
weekly basis, but not Zara. Zara has regular and small deliveries, twice a week to all the
stores around the world. The store managers’ order clothes at precise times, and on schedule,
new garments arrive.

5. Business Model Analysis

5.1. Identification of key success factors of Zara
The fashion director of LVMH said that Zara is the most devastating and innovative retail
brand in the world (John M. Gallaugher,2008). The product of Zara looks like high-end
fashion, but not expensive. The market of Zara cover 68 countries until now. Why can Zara
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do this successful job? There are five main reasons. Firstly, Zara's design is based on the
demand of customer and meet people’s need of individuation. The second reason is Zara
provide the unique product by limited run and Zara always update new product quickly in
store. The third reason is Zara has young design team who are passionate and innovative. In
addition, Zara gather the data by PDA (personal detail analysis) via store POS (Point-of-sale)
system to analysis customer’s behavior. The last reason is Zara's unique manufacture and
logistic process (John M. Gallaugher,2008).

6. Discussion of key success factors of Zara

6.1. Individuation
Zara's most successful reason is it follows the fashion trend of individuation. In the
traditional fashion industry, firms often attract customers by produce lower cost and similar
product to gain a slender portion of the profit. However, they ignore the fact that customers
are willing to pay the higher price for the individuation product, they are the target customers
Zara looking for (Chua, J.,2015).

6.2. Limited
Zara has limited production runs, and it mainly have three benefits. Firstly, it can
make the product have the unique value, which can bring customers new store experience
every two weeks and people will rarely have the same clothing with others. Secondly, it can
make customers pay the full price for the product because not every product can wait
customers. Last but not least, limited production runs can reduce the risk of collection
mistakes and reduce the loss of stock (John M. Gallaugher,2008).

6.3. Designer
Zara's designer teams are mostly young, professional, passionate and creative (John
M. Gallaugher,2008). They often go to New York, London, Paris, Milan, Tokyo and other
fashion cities to learn the new fashion trend and collect the newest information of sells
conditions and customer feedbacks. Based on the report, Zara has more than 400 designers
who are the typically ‘fly-man'. They often appear in Fashion shows or some fashion events
in Milan and Paris and shows in several fashion activities to observe and collect the newest
design concept and fashion trend (Smith, K. 2014). Normally, after some top brand produces
their product, Zara will launch the similar design soon. This design method can make sure
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that Zara follow the fashion trend and make the brand take the 35% of middle to high market
share, which makes Zara become the top 100 famous fashion brands (Smith, K. 2014).

6.4. Data
Another key successful factor of Zara is their data collection in store. Zara has
personal digital assistants (PDA) to gather the customer information. Stuff often chat with
customers to collect the customer's suggestions, looking for feedbacks of products to analysis
the store's product performance (John M. Gallaugher,2008). PDA are linked to the store's
POS (point-of-sale) system, which can see the garment sell data and stock conditions hourly
online. The manager will order the product by PDA based on the data collected in POS twice
a week. By using PDA and POS, head office and store can connect each other well in time.
Zara's design always based on the demand of the customer (John M. Gallaugher,2008). The
sales data and customers demand will be collected by every store and send to the head office.
Then the designers can make design based on customer's demand (John M. Gallaugher,2008).

6.5. Manufacture and Logistic

Zara can finish the design, manufacture and delivery within 15 days without the
vertical 6 integration process, in-house manufacture and clear logistic system. Based on
report, over half product are produced in La Coruña, which can lower recycle time, reduce
error and finish the complex task (Smith, K., 2014). The trucks and flight serve are designed
for the optimal time and distance, which allow the product delivery in time and frequently. It
is worth to mention that Zara use the biodiesel for trucking. The renewable energy system
allows Zara to have a better performance in sustainable development, therefor increase the
reputation of Zara (Smith, K. 2014).

7. Compare and contrast Zara’s product management process with traditional new
product process
7.1. Opportunity identification and selection
In new product process, the business will generate, research, evaluate and rank the
new product opportunities, new product suggestions, change in market plan, resources change
and new needs in the marketplace (C. M. Crawford, 2012). However, in Zara's case, the
opportunity identification is based on the need of customer, the trend and elements in the
high-end fashion show, and fashion event all over the word.

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 7.2. Concept generation
In new product process, business will select high potential opportunity and active
customer involvement. They will collect the new opportunity ideas by problem solve
approach and select the suggested solutions from problem-solving activities (C. M. Crawford,
2012). However, in Zara's case, Zara’s personal digital assistants (PDA) will gather the
customer data and staff will chat with customers to collect feedbacks. For example, if the
customer doesn't like the color or the V shape collar, PDA will record this feedback for the
headquarter (where designers located), and designers will change the product based on
customer's need.
Concept evaluation In new product process, the new ideas need to be evaluated,
screened, sorted out before been generated. The business will evaluate the product concept on
technical, marketing, and financial aspect (C. M. Crawford, 2012). Similarly, In Zara's case,
designers will get feedback from colleagues and team members to decide the new design
project. However, due to Zara is integrated vertically, the distribution center, design and
manufacture all located in La Coruña, which saves time between suppliers and designers. As
a result, the concept evaluation process is faster than other business.

7.3. Development
In new product process, the development includes resources preparation, and the
comprehensive business analysis, such as the financial analysis. The product stream contains
industrial design, bench work, prototype, product specifications and so on, which mainly
consists of produced, tested and costed out (C. M. Crawford, 2012). However, in Zara's case,
the in-house manufacture gives Zara higher speed and lower recycle time. According to the
research, 2.5 million items will be sent out weekly and 9 there is no item stay in stock over
than 72 hours (Inditex.com, 2015).

7.4. Launch
In new product process, business will commercialize the plan and prototypes from
development phase, distribution, and manage the launch program to achieve the goal. When
product been launched, the track plan needs to be prepared carefully. New product manager
should implement the tracking plan, seeking to spot every glitch during launch and prepared
solutions (C. M. Crawford, 2012). Similarly, in Zara's case, the clear logistic progress
guarantees the in-time transportation. The POS system makes sure the sell condition is tight
controlled by the manager and headquarter. However, most appeal business reproduce the
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most welcomed product, but Zara is different. They just produce the new product once in
limited quality as Zara aims to provide customer new product experience rather than rely on
the hot sale product (2015, Zara).

7.5. Evaluate Zara’s product management process and ‘New product process’
The new product process often takes six to nine months for new product design and
manufacture, which requires the process of product evaluation, testing, and financial analysis.
Unlike other fashion brand, Zara saves the cost of advertising and sales cost by using
vertically integrated manufactured process (Günbal, B., 2015). Zara's fast speed is benefit
from the vertically integrated supply chain, in-house manufacture. The data collected system
of PDA and POS provide Zara a platform to control the sells figure and contribute a better
design to meet customers' demand. What traditional business can learn from Zara is that they
always make the limited amount of product. Although Zara launches about 12000 styles each
year, the amount of each product is limited, including the hot sales items. ‘Buy more style,
less quantity’. Zara breaks the traditional product process, satisfied the needs of
individuation, which gives them more loyal fans.

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 8. Conclusion
In conclusion, Zara breaks the rules of the fashion industry. Zara is successful in fast
fashion industry because they use the right business model, meet the individuation
requirement of customers, produce more styles but limited quantity, use young designers,
collected data by ADS, tightly control the sales condition by POS, in-house manufacture
process, and clear logistic system. Instead of traditional new product process, Zara uses a
vertical-oriented system that can faster the speed and lower the cost. It is a win-win method
as customers can catch the fresh fashion items and business can obtain more profit. Inspired
from Zara's successful story, companies can break the traditional product process, therefore,
improve their business performance.

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9. Used literature
- John M. Gallaugher,(2008) Zara Case: Fast Fashion from Savvy Systems, [online]
Available at: http://www.gallaugher.com/chapters [Accessed 26 May 2021].
- C. Merle Crawford& C. Anthony Di Benedetto, (2012) New Products Management,
11th Edition, New York: Mc Graw Hill Education
- Smith, K. (2014). Zara vs H&M - who's in the lead? @EDITD compares the apparel
retail strategies. [online] EDITD. Available at: https://editd.com/blog/2014/04/zara-
vs-hm-whos-in-the-global-lead/ [Accessed 26 May 2021].
- Günbal, B. (2015). Zara: Fast Fashion. [online] Slideshare.net. Available at:
http://www.slideshare.net/gunbal/zara-7936993 [Accessed 26 May 2021]

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